Stablecoins Could Reach $4 Trillion by 2035, Bernstein Researchers Predict

Bernstein Research, a global equity research and brokerage firm, has projected the global stablecoin market to grow by 4 trillion US dollars by 2035. According to them, this significant upscale in a decade comes courtesy of the “blockchain utility era”.

During this blockchain revolution, Bernstein Research expects the technology to change the entire architecture of the global financial rails.

Who Is Bernstein Research?

Bernstein Research is a globally renowned equity research firm. They have their own brokerage firm as well. They are the leading provider of quality information regarding the market to institutional investors.

Founded in 1967, the firm has since been renowned for its independent, intellectually rigorous research that challenged market consensus.

Analysts from Bernstein cover a wide range of sectors from technology and financials to healthcare, energy, and emerging digital asset markets. By blending quantitative modelling, company-level forensics, and macroeconomic context, Bernstein Research performs deep fundamental research to provide the most accurate information to its institutional clients.

Recently, Bernstein Research has become quite influential in the cryptocurrency market. They are renowned for their forward-looking publications on stablecoins, tokenization, Bitcoin, and digital market infrastructure.

Drivers Behind The $4 Trillion Projection

Out of the many factors that have led to this 4 trillion US dollar projection for stablecoins, the major factor remains the increasing adoption of decentralized finance(DeFi) in traditional finance.  This involves digitizing assets and using faster and highly scalable digital payment systems. Stablecoins like USDt and USDC are pegged to the US Dollar, while EURt is pegged to the Euro. This provides a lot of payment convenience while avoiding the risk of the inherent volatility of non-stable cryptocurrencies.

As consumers and businesses are transitioning towards a new era of payment systems, it is obvious that stablecoins will find a significant place in the financial space. This will raise their demand and their significance. This is especially true in the case of cross-border payments, where the time and fees are a great inconvenience when using the instruments provided by traditional finance.

Another key driver is institutional participation. Large financial institutions, hedge funds, and corporate treasuries are increasingly seeking modern blockchain alternatives to traditional finance while avoiding the volatility of popular crypto assets like Bitcoin and Ethereum. As stablecoins are a viable solution for treasury management, liquidity provision, and security purposes, it is no surprise that these traditional finance giants of the corporate sector will have an eye for stablecoins.

Most institutional giants see stablecoins as a suitable settlement asset with the digital advantage of blockchain technology. According to them, stablecoins can bridge DeFi (Decentralized Finance) and traditional finance. According to Bernstein’s analysts, the larger institutional adoption will increase the liquidity of the stablecoin environment, which will reinforce its title as the mainstream digital financing tool.

Implications for Investors and the Crypto Market

As stablecoins get into the mainstream finance, investors could get a suitable entry asset into the crypto domain. Those investors, both retail and institutional, get an exposure to the crypto market without having to worry about the volatility of normal crypto assets. This will attract a broader audience, increasing the use of stablecoins over time.

The broader use case of stablecoins in the market will invariably increase their liquidity and demand. In addition to this, broader crypto investors will soon start using stablecoins as a safe hedge against the volatility of their overall portfolio, thus safeguarding their investments.

In a world where traditional finance is rapidly integrated with daily life, these stablecoins become an inevitable part of it. Soon, stablecoins may replace traditional currencies as the standard for financial transactions. With more countries coming into the realization of the need for digitizing their native currency, we may see the digital version of every nation’s currency on the blockchain.

As stablecoins find such utility, they may have broader implications for other cryptocurrencies as well. Other cryptocurrencies may find utility as trading pairs, collateral, or investment instruments. This will reinforce the entire digital asset space, and cryptocurrency will soon become a household term.

However, integrating stablecoins to such an extent is not without its challenges. Increased regulatory scrutiny will be the first and most obvious hindrance. As authorities have to focus on consumer protection, financial stability, and anti-money laundering policies, the onboarding process may take time, and authorities worldwide will have to reach a consensus about stablecoins and their regulatory compliance.

Potential Risks and Regulatory Considerations

Despite the promising growth factors, a surging stablecoin environment may have its own flip sides to the financial ecosystem as well. A major concern is market instability. If not fully backed by traditional assets or equivalent assets that maintain their value, stablecoins may have problems arising from the lack of transparency.

In a worst-case scenario, if the general trust in a stablecoin is lost, it can lead to huge liquidity crunches, and it may affect related crypto markets. Operational risks, including cybersecurity breaches and technical failures, are also a critical concern given the digital nature of these assets.

Conclusion

The projected $4 trillion growth of stablecoins is indicative of the evolving nature of global finance. While adoption promises the advantages of convenience, liquidity, and new investment opportunities, it also brings regulatory scrutiny, operational risks, and potential market instability. As this system is constantly evolving, investors, institutions, and regulators will need to balance innovation with oversight if they are to build a sustainable and safe future for global finance.

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